Wednesday 1 July 2009

GLOBAL MARKETS: European Stocks Higher; Risk Appetite Grows

GLOBAL MARKETS: European Stocks Higher; Risk Appetite Grows

By Ishaq Siddiqi

LONDON (Dow Jones)--European stocks pushed higher Wednesday, with risk appetite back on the rise as the new month and second half of the year kicks in. Investors will now look to upcoming key macroeconomic data for further signs of a recovery in the global economy.

"Risk appetite is up and European indexes need to hold above key support levels for sentiment to remain positive," said David Morrison, strategist at GFT. "Traders are looking ahead to Thursday's nonfarm payrolls for June and crucially, the U.S. earnings season which kicks off next week."

At 0800 GMT, the Dow Jones Stoxx 600 index was up 1.1% at 208.18, London's FTSE 100 index was up 1.3% at 4307.45, Frankfurt's DAX index was up 1.5% at 4884.02, and the CAC-40 index in Paris was up 1.7% at 3193.99.

The U.S. labor market will be under the spotlight, ahead of the payrolls, with the publication of the ADP employment survey for June at 1215 GMT.

"The recent stabilization (even if it is at a high level) of initial jobless claims suggests that the ADP employment change in June is likely to remain negative, but might be the lowest since October 2008," said Jerome Deneaux, analyst at Newedge Group.

The nonfarm payrolls data are due Thursday at 1230 GMT, a day early because of Friday's U.S. public holiday, and the ADP release offers a good 'heads-up' for traders, especially as they measure employment in the private sector.

Still, a poor consumer confidence number in U.S. Tuesday sent stocks lower on Wall Street. Despite closing off the session's lows, the Dow Jones Industrial Average fell 1.0% to 8447.0, having fallen as low as 8394.0 during the session. The S&P 500 stock index fell to 919.32.

Asian stock markets were mixed Wednesday, with some weighed by weakness on Wall Street and the discouraging U.S. data. Japan's Nikkei 225 closed down 0.2%, while Korea's Kospi gained 1.5%. Hong Kong's Hang Seng index was closed for a holiday.

The Tokyo stock market was barely moved by the Bank of Japan's quarterly tankan survey, which came in slightly weaker than expected with the headline diffusion index for large manufacturers at minus 48, compared with a minus 43 result expected.

Still, there was cause for hope as it was an improvement from the record low of minus 58 posted in the previous quarter, bolstering the view that the worst is over for the Japanese economy.

Elsewhere, the crude oil futures market pushed higher Wednesday, rebounding after losses Tuesday as a decline in U.S consumer confidence damped hopes for a quick economic recovery.

At 0815 GMT, the August crude contract on Globex stood at $70.87 per barrel, up 98 cents, having settled Tuesday at $69.89 per barrel, down $1.60, on the New York Mercantile Exchange.

At 0815 GMT, spot gold stood at $931.10/oz, around $5 higher than in late New York business Tuesday.

In the currency markets, the dollar regained some ground as the market turned cautious again. "It is becoming clear that risk appetite is starting to lack consistency and any catalyst could trigger a broad correction amid weak summer liquidity conditions," said Geoffrey Yu at UBS.

At 0815 GMT, the euro stood at $1.4070, having come close to breaching the $1.4000 level, while the dollar stood at Y96.81, having risen to a near two-week high of Y97.00 in Tokyo.

The safe-haven sovereign debt markets have edged lower Wednesday, as the equity markets have gained. However, trading has been subdued ahead of the latest debt issuance from Germany, which reopens EUR6.0 billion of its 3.5% 2019 bund, the 10-year benchmark.

At 0820 GMT, the September bund contract stood at 120.97, 0.11 lower.

-By Ishaq Siddiqi, Dow Jones Newswires; +44-20-7842-9488;

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(END) Dow Jones Newswires

July 01, 2009 04:21 ET (08:21 GMT)

Copyright 2009 Dow Jones & Company, Inc.

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